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Scrapping of carbon tax threatens carbon farming

Henbury Station in Central Australia, site of a failed attempt to establish the world's biggest carbon farm.

ABC: Caddie Brain

Research and lobby group, the Australian Farm Institute, says carbon farming won't be profitable for years, if an emissions trading scheme is fast tracked.

Prime Minister Kevin Rudd will scrap the carbon tax and move to an emissions trading scheme next year - one year earlier than originally planned.

The fixed carbon price of $24.15 a tonne will be removed in favour of a floating price, thought to be between $6 and $10 a tonne.

Mick Keogh, from the Australian Farm Institute, says that price is too low for farmers to make profits from the Carbon Farming Initiative, a scheme where farmers earned carbon credits and sell to people and businesses wanting to offset their emissions.

"If you're in the market to sell carbon credits, you're now looking at the potential next year that those credits will be worth $6 a tonne, rather than the $24.15 a tonne," he said.

"That obviously has a big impact on the potential profitability of a project you might be looking to undertake.

"It would be very limited numbers of projects that would likely to be viable."

Farmers say the carbon tax has significantly pushed up their bills, especially electricity.

Australian Dairy Farmers president Noel Campbell says a lower carbon price is a win for agriculture.

"It's positive compared to where we have been, certainly it will make a difference," Mr Campbell said.

"But still we will need to make sure that with whatever situation we've got, we're in a competitive situation with the people that we trade against."

Opposition Leader Tony Abbott says the Prime Minister has not truly abolished the carbon tax, but is merely changing its name.

The Greens leader Christine Milne says the decision to scrap the carbon tax is "cowardly".

The Australian Industry Group says Mr Rudd's move is positive and will cut costs for businesses once the floating price begins next July.